Three Funding Options For Your Start Up Business

“They’re still quite restrictive for startups…”

If you’ve just started a business and are looking for capital from the Small Business Administration…good luck to you.  According to Adsheesh Advani of if you’ve realized your dream of starting your new business, finding money to keep the doors open can be a hellish nightmare.

Despite lending nearly $50 million a day, the Small Business Administration still rejects far more applicants than they accept.  In fact, according to their most recent business loan activity report for this past week ending, only 27% of start ups received funding for their business needs.  Essentially leaving more than 7 out of 10 start up business owners out of luck.

In fact, what you’re going to need for getting funding through the SBA and most banks is two to three years of business history including financial statements and some sort of owner’s equity (assets and collateral).  Not surprisingly, as many business owners pull themselves up by the bootstraps, most lending institutions frankly don’t care.

So what are your options?  Here’s a few:

All is not lost when it comes to getting financing for your company, but first it’s best to know your options and what’s required.

1. Venture Capital – venture capital involves finding a private source of funding for your business.  They would expect a return on their investment based on your company’s performance.  What VCs look at is the probability of success for your start up.  Here’s where things look fairly bleak.  Because of the risk involved with your new business, venture capitalists are extremely picky.  Despite the notion that like our love lives where there’s someone out there for everyone of us, there’s very few VCs out there for you.

In fact, according to, you have approximately a .5% chance of getting venture capital funding.  In other words, this is a white whale probably not worth your time chasing.

2.  Cash Advances – let’s say you run a coffee shop that serves customers who can’t be separated from their loved ones (dogs and bear with me) and you take credit cards.  One possible option is to take a cash advance or sometimes known as Merchant Cash Advance.  What a lender will do is take payments from future credit card transactions.

The price tag?  Hope you’re sitting for this one…they can cost you as much as 30-50% per transaction.  Essentially for every dollar of dog lover lattes you ring up,  you give the lender fifty cents.  Essentially the company will look at your prior business history, credit and your ability to pay.  Now one advantage these do have is if you have some lean months, you’re still paying based on credit card transactions.

3.  Micro loans – micro loans are business loans, just smaller and with shorter repayment periods.  Companies like Formula 5 Capital loan businesses sums that may be less than $150,000 to companies with a shorter business history.  Now these aren’t perfect products.  They can be expensive in terms of interest rates, but they do get paid off like a normal loan.

Criteria for approval varies per lender and some don’t ask for collateral, assets or perfect credit.  Typically a micro loan lender will look at your overall credit, business history and what you are looking to do with the money.  For instance, if you’re looking to add a high end piece of software that you can demonstrate improves your ability to sell goods you may be eligible for a micro loan.

The key in making any financial decision for your business is to have as much knowledge at your disposal.  Knowing your credit history, looking over your financials and crafting a solid plan for what you intend to do with your funds is critical in making a decision about funding your start up.

We’d love to hear about your experience, tell us about it below.